SBI Flags Reliance Communications Loan as Fraud
The State Bank of India (SBI) has officially classified the loan account of Reliance Communications Limited (RCom) as “fraud” and has reported its former director, Anil Ambani, to the Reserve Bank of India (RBI). The decision could prompt other lenders to follow suit, intensifying scrutiny on the former telecom giant’s financial dealings.
Key Findings in the Fraud Investigation
- Total outstanding loans: ₹31,580 crore
- ₹13,667.73 crore (44%) used for loan repayments
- ₹12,692.31 crore (41%) paid to connected parties
- Improper use of sanctioned funds, including misappropriations via Inter-Corporate Deposits (ICDs)
SBI’s internal Fraud Identification Committee found major irregularities, including diversion of loans through a complex web of group companies such as RCIL, RITL, and RTL. Funds were cycled intraday through various accounts, indicating alleged manipulation of financial books.
Broader Implications and Regulatory Actions
Under RBI’s guidelines, any loan declared as fraudulent mandates immediate reporting to RBI and law enforcement agencies. Borrowers involved in such frauds face a ban from accessing new financing from banks and public financial institutions for five years, with restructuring also restricted.
The committee flagged transactions as “fictitious” and accused RCom of manipulating account books to reduce visible liabilities while misrepresenting fund usage. Specific concerns included:
- Use of Dena Bank’s ₹250 crore loan for unrelated party ICDs
- Improper routing of ₹248 crore IIFCL loan meant for capital expenditure
- Untraceable transactions worth over ₹13,000 crore out of ₹41,863 crore
RCom’s Insolvency Background
RCom has been under corporate insolvency resolution process (CIRP) since June 28, 2019. All loan transactions currently under scrutiny occurred before this date. The Resolution Professional, Anish Niranjan Nanavaty, is overseeing the company under orders from the National Company Law Tribunal (NCLT).
What Happens Next?
The classification of RCom’s loans as fraudulent may have long-lasting implications on the Ambani-led company’s insolvency proceedings. It also raises red flags for lending institutions to enhance due diligence. Regulatory agencies like the CBI and Enforcement Directorate may now initiate deeper investigations into the alleged diversion of public money.
Other banks exposed to RCom’s borrowings may also start internal investigations and report the frauds individually. The case serves as a wake-up call for improving corporate governance, accountability, and fund monitoring in India’s banking and telecom sectors.